US Navy Shipbuilding Has A BIG Badger Problem

John - Enjoyed the article, and while I don’t argue with any of the facts, I do have ( albeit a semi to non-informed) opinion that you are overstating the impacts of bureaucracy.

While the impact of NAVSEA may well have a negative impact on shipyard efficiency, viability and profits. In my view the major impact on shipyard profits has been the sole reliance on one customer. In any business model that gives that customer a huge negotiation advantage. Even though the sums are huge, I am sure in addition to adding bureaucratic inefficiencies, they are also expert at evaluating the break even point for the shipyards for these projects and have the ability to take the shipyards near that point.

But how we got there, not where we are is a part of this. I hope there is no realistic argument that shipbuilding ability is a strategic need. The issue is the process we have relied on to protect, subsidise and support this ability. The indirect subsidies of the Jones Act has been a abject failure in protecting and advancing US Shipbuilding. While many may argue this – the empirical evidence staring us in the face would suggest these arguments are more prejudice toward an answer you want instead of the evidence you are looking at. I feel your article is an example of this. The failure of US shipbuilding is not because of bureaucracy , or wokeness ( whatever that is ). The failure is indirect subsidies give smart and incentivised buyers opportunities to look for alternatives, and over the years they have. This has driven the need for US built ships to the absolute minimum. This has driven the shipyards to rely on Navy business to such a degree that they have lost commercial leverage.

If, and think the answer is yes, that shipbuilding is a strategic need, and indirect subsidies have not worked, the answer is direct subsidies. It is the place of the law makers to make the case to the people that this is an important strategic need, and set those smart folks at NAVSEA to that task of how to fund that out of a DOD budget.

You’re right and I mentioned that several times in the article.

This is an important point. That said I mentioned this point too. I even put it fairly early in the article. Specifically when I say that the DoD ignores marad who’s in charge of subsidies and neither the marad commandant nor Secretary Pete (who loves press) have said anything publicly about supporting shipyards.

The problem is marad is in charge of subsidies, but it is broken and has no political power. The DOD has tons of influence in power, but completely ignores marad.

The navy one subsidies, then they need to help marad I going to bat for them in Congress.

The reason that Chinese shipyards I have so many billions upon billions of dollars in subsidies is because the peoples liberation army demands it. Can you imagine what would happen if our most influential Army generals Austin and Miley demanded that shipyards be helped? Congress would find the money fast.

But our army does not support commercial shipyards and neither does our Air Force but both will absolutely need American ships for fuel and resupply during a war.

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As mentioned in the article.

  1. it’s illegal for a DOD to fund shipyards directly

  2. it’s unethical and bad business practice to have the biggest customer right cash payments

  3. it’s not their job. funding shipyards is the job of Marad

  4. marad’s is controlled by a US Navy rear admiral, and her boss is a navy veteran so there is really no excuse.

  5. the DOD doesn’t have to pay for it out of their budget. All they need to do is push Congress to fund marad’s budget.

Not sure I saw that point made - just skimmed it again and didn’t see it. Sure my reading skills - or inability to make my point clearly. To be clear the point I was making was for large commercial vessels. The high cost of US built has incentivized the users of these ships to find other alternatives. By nearly eliminating the large ship commercial contracts, the yards are faced with only one major customer – the US Government

To your points -

and others of the same general point - we are in violent agreement - with one exception. It seems you want Marad in some existing way framework to subsidize shipyards. I don’t see how, in the existing system of indirect subsidies. - By these, I mean providing non - market barriers limiting the options of ship yard buyers - thus adding costs, with the intent that the users of these shipyards would bear those costs. It was not a bad plan when proposed - but as stated above what the long term effect has been is limiting US built ships to those absolutely needed. And for a good part of the last 50 years or so - on tankers at least the majority of this was ANS Crude oil - which was prohibited from export.

The major point I am making is these indirect subsidies did not work. You and I are aligned that US Shipyards are a strategic need. We also seem to be aligned they need government support to stay alive. Where we differ I feel, at least on this point, is you feel that is something MARAD can somehow do now. I am not sure that is possible.

My point is our lawmakers in Washington should change the law and allow the US Government to directly support our shipbuilding industry, if we consider it a strategic need. Make that case to their constituents - vote it into the budget and let the DOD pay it.

We can then remove all these non-competitive, market interfering levers in some attempt to indirectly assist them. And treat them as a strategic national defense asset. We don’t try to build aircraft carriers by indirect market manipulation - we determine they are needed national defense assests - we put them in the budget, and we pay for them.

A big issue to address in these little boxes, and there would be many details and issues of course - but again the main point is the current system does not work, it needs change - not tweaking

I don’t want MARAD to be in charge of the subsidies but I don’t want the U.S. Navy to be in charge either. If I had a magic wand, I would create a new agency from scratch but that would be even harder to get through Congress.